Editor’s Note: We are providing an equity trade for conservative investors and an options trade for aggressive traders.

EQUITY TRADE INSTRUCTIONS

Symbol: TGT (NYSE)
Limit: Buy below $68
Holding Period: 6 months
Target Price: $76
Target Gain: 12%

OPTIONS TRADE INSTRUCTIONS

Symbol: TGT190719C00065000
Limit: Buy the Call option below $7
Strike Price: $65
Expiration Date: July 19, 2019
Target Gain: 57%

COMPANY DESCRIPTION

Target Corporation operates as a general merchandise retailer in the United States. In addition, the company offers in-store amenities, which comprise Target Café, Target Optical, Starbucks, and other food service offerings. It sells its products through its stores; and digital channels, including Target.com. Target Corporation was founded in 1902 and is headquartered in Minneapolis, Minnesota. Link to company website.

TRADE RATIONALE

Retail stocks are getting slammed today after Macy’s reduced its revenue and sales guidance for this year. Shares of Macy’s were down 17% at the market open.

That triggered a wave of program selling by ETFs that cover the retail space, which in turn pushed down the price of Target 4% this morning at the same time it reaffirmed its sales and earnings guidance for this year and declared its regular quarterly dividend.

Unlike Macy’s, Target is not a “mall store” so its foot traffic is up and same-store sales have increased during the past year. In addition, it is racking up double-digit growth in online sales in spite of Amazon’s presumed market domination in that space.

Target’s share price took a big hit back in November after the company reported a Q3 revenue figure of $16.9 billion which came in slightly below analysts’ overly optimistic estimates. In addition, there were concerns at that time that the upcoming Black Friday/Cyber Monday sales figures would be less than hoped for across the entire retail industry (that later proved unfounded).

The fact of the matter is Target has been proving its naysayers wrong, and I believe its Q4/year-end results released the first week of March will make clear its superiority to its peers. Don’t chase the stock (or the option), but today’s sector weakness provides an opportunity to buy both at a significant discount to what I believe to be their fair value.

According to my IDEAL Stock Rating System, Target has an IDEAL Value of $111. Of course, I don’t expect it to reach that share price anytime soon, but we only need TGT to get back to where it was trading less than two months ago to make a very nice profit on this trade.